1. Russian Securitization Market : TO BE OR NOT TO BE ? September 10, 2007 New York, NY Igor Kouzin CEO, DeltaCredit Bank

2. 2 September 10, 2007 Jan Feb Mar Apr May Jun Jul Aug Jan Fe Ma Apr Ma Jun Jul Au Se Oct No De 240 220 200 180 160 140 120 100 Why couldn’t it last?  BUT Sources: SG, Citibank, CBR, Moody’s

3. 3 September 10, 2007 The “Market Future” Puzzle II. RATING AGENCIES I. INVESTORS III. ORIGINATORS/ SERVICERS/ISSUERS IV. BORROWERS/ STATE

4. 4 September 10, 2007 Securitization Value Chain - Investors Borrower Credit Servicing Issuers Investor Origination  Will there be investors?  Onshore  Offshore  USD, EURO or RUBLE  Who will they be?  Local banks (why?)  State (possible!)  ABS desks  EM desks  Bargain-hunters?

5. 5 September 10, 2007 Rating Agencies & Transactions Costs Borrower Credit Servicing Issuers Investor Origination  Rating agencies  If we thought default probabilities were high for Russian deals, we ain’t seen nothing yet !  Ratings “deflation” very likely  Is Russia “sub-prime”, or are assets “sub- prime”, or both ?  Will legal and other due diligence costs go up?

6. 6 September 10, 2007 Issuers Borrower Credit Servicing Issuers Investor Origination  Warehousing – will arrangers be prepared to take substantial risk during warehousing ?  Conduits – could be a “dead duck” or a “white night” (hide Russia paper in a file of other securities)  Multi-seller issuers – will investors continue to accept transactions with heterogenous pools?

7. 7 September 10, 2007 Servicing Borrower Credit Servicing Issuers Investor Origination  Will servicer ratings become mandatory?  State as master servicer – is there conflict of interests?  Did anyone actually take a close look “under the hood”…

8. 8 September 10, 2007 Credit Borrower Credit Servicing Issuers Investor Origination  Let’s get ready to be real:  “Confirmed” income does not mean there is a paper slip in the borrower’s file; it means there is income in the person’s bank account! (only one example)  Does anyone in Russia know what a real credit due diligence look like?  By the way, is anyone tracking vintage delinquencies?

9. 9 September 10, 2007 Origination Borrower Credit Servicing Issuers Investor Origination  How many originators segment their sales strategies – Prime, Alt-A, Sub-Prime?  How many know how to originate with an eye on investor demand & rating agencies ? ….  How many are able to continue origination without having access to securitization …, i.e. how many repeat, benchmark issuers will there be?

10. 10 September 10, 2007 Borrowers/State Borrowers/ State Credit Servicing Issuers Investor Origination  Are borrowers ready to borrow at higher rates – resounding “YES”!  Will the Russian state allow mortgage rates to go up during and after the election year. Quote from Medvedev: …. RBC Daily  What happens if they don’t – will there be enough spread in the structure to earn high enough ratings and attract investors

11. 11 September 10, 2007 Predictions Activity will differ by sector:  Future flows - unaffected  Consumer credit – strong (albeit slower) growth  Auto loans – will depend on performance of international & Russian issuers over the next 12 months  RMBS – 3-4 strongest issuers/servicers will become country platforms More differentiated pricing – benchmark issuers will emerge in every sector Margins will widen, but not as much as other classes because Russian ABS margins have been wide to begin with (2 to 3 times more at comparable ratings levels corporate bonds)